Rocket Internet seeking to raise up to $1.8 billion in IPO

Berlin/Frankfurt: Rocket Internet AG, the technology investor known for replicating businesses from Groupon Inc. to Airbnb Inc., almost doubled the amount it’s seeking to raise in its initial public offering (IPO) to €1.4 billion ($1.8 billion).

The German e-commerce investor, which is offering as many as 32.9 million new shares at €35.50 to €42.50 apiece, has enough orders to cover the sale across the price range, according to terms seen by Bloomberg News. JPMorgan Chase & Co. and Scotland’s Baillie Gifford & Co. pledged to invest a total of €450 million, Berlin-based Rocket said on Tuesday.

Proceeds from Germany’s largest IPO this year will let chief executive officer (CEO) Oliver Samwer push Rocket deeper into emerging markets such as Latin America and Asia by mimicking successful e-commerce companies. Presenting to a roomful of Rocket executives and reporters at a Frankfurt hotel on Wednesday, Samwer said online and mobile commerce have only started to gain steam since 2007 in the emerging markets its companies target.

“The fewer stores a country has, the faster e-commerce grows,” he said. “Whoever doesn’t believe that can look at the Alibaba prospectus.”

In meetings with investors, Rocket has compared its business model with that of Jack Ma’s Alibaba Group Holding Ltd. Alibaba, the Chinese e-commerce operator, surged 38% in its US trading debut on 19 September to value the company at more than $230 billion.

EHarmony, Pinterest

Brothers Marc, Oliver and Alexander Samwer got their start setting up a German version of EBay Inc. in 1999, and have since duplicated sites such as those of EHarmony Inc. and Pinterest Inc. Rocket typically starts the companies, hires staff and provides initial marketing, design and management know-how.

“The goal is to one day be a leader in the Internet field outside the US and China,” Oliver Samwer said on Wednesday.

Ten Rocket e-commerce start-ups for which shareholder Investment AB Kinnevik disclosed earnings—including Lamoda, Dafiti and Westwing—had an aggregate operating loss of €432 million last year on sales of €743 million, according to data compiled by Bloomberg. Samwer said this month that the company plans to eventually become profitable and that it targets investors seeking long-term growth.

Zalando SE, the shoe and fashion retailer that received initial funding from Rocket in 2008, is making its own trading debut next week as it seeks to raise as much as €633 million.

Topping Braas

Rocket’s IPO could surpass Braas Monier Building Group SA’s $640 million sale in June to become the largest in Germany this year, according to data compiled by Bloomberg. The country’s initial sales raised about $1.3 billion in the first half, less than half what they did in the same period last year, the data show.

The offer period runs from Wednesday to 7 October. At the midpoint of the price range and including an over-allotment, the seven-year-old business controlled by Samwer and his brothers would have a market value of €6.2 billion, the statement shows. The company will be listed on the Frankfurt stock exchange on 9 October.

Rocket announced a target to raise €750 million on 10 September. It boosted the amount late on Tuesday after receiving commitments to buy €582.5 million of shares. Baillie Gifford plans to invest €350 million, while JPMorgan has pledged €100 million, according to the sale prospectus. Other investors are FAR Global Private Markets Ltd, Discovery Global Opportunity Master Fund, Makshaff Trading Investments Co. and Credit Suisse Group AG.

‘Exciting’ potential

“We are committed to investing in growth companies with exciting long-term potential and building strong relationships with their management teams,” James Anderson, a partner at Baillie Gifford, said in a statement. Gifford, also an investor in Kinnevik, has previously backed Amazon.com Inc. and Facebook Inc.

Philippine Long Distance Telephone Co. and Germany’s United Internet AG last month injected €768 million into Rocket. The e-commerce incubator subsequently got a bigger hold on some of its investments in an deal that gave shares to Holtzbrinck Ventures GmbH.

The stake of Rocket’s controlling shareholder, the Samwer brothers’ Global Founders Fund, would fall to 39.8% from 52%, assuming the over-allotment option is fully exercised.

Kinnevik of Sweden would hold 13.8%, while United Internet would be diluted to 7.9%, PLDT to 6.4%, billionaire Len Blavatnik’s Access Industries to 6.3% and Holtzbrinck to 1.9%. About 24% of Rocket’s shares would be tradable.

Berenberg Bank, JPMorgan and Morgan Stanley are arranging the sale. Bank of America Corp.’s Merrill Lynch, Citigroup Inc. and UBS AG are joint bookrunners. Bloomberg